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January 5, 2017

A Modern Glossary of Procurement Technology Terms

A Modern Glossary of Procurement Technology Terms

Procurement technology has changed a lot over the last few decades. The terminology we use to describe the technology we have today versus the technology we want/need in the future, or are reading about in industry literature, has changed as well. Unfortunately, even the most common terms in our field are used to imply a variety of applications and functionality, but often with no clear definition.

In other words, when you say “solution suite,” you may have something specific in mind, but your colleague or a vendor is thinking of an entirely different concept. Same goes for the other terms below. But don’t feel bad — even the most seasoned industry analysts sometimes use the terminology interchangeably.

The business world, and our industry, are changing fast. As new technology solutions come online, procurement practitioners like you need to be sure you are using the right terms to describe your organization’s technology needs. This is especially true if you’re considering upgrading or making your first foray into source-to-pay or enterprise contract management.

To help you in this effort in 2017, the glossary below provides definitions gleaned from our experience to clarify some of the most frequently used terms in the industry today.

Cloud: An Internet-based approach to computing that allows networked devices to share/access hardware, data, processing power, and storage space flexibly on demand. For the procurement industry, the cloud has made it possible to buy software-as-a-service (SaaS) rather than implementing and hosting software on dedicated hardware at a third-party facility or behind its own firewall. The scalability enabled by cloud computing – whether for processing power or concurrent users – is transparent to end users when managed correctly.

Platform: A technology foundation or core that connects or integrates one or more solutions with a centralized master database and centrally dictated workflows. In the context of procurement, the platform sits at the center of (or beneath) one or more solutions (see below), allowing the company to leverage a single version of the truth in the form of master data for any number of business objectives and by a range of functional teams – including suppliers.

[A platform is not the same as a “native code base” – a requirement that would exclude solutions designed by other companies/teams and then consolidated on a common code base through a merger or acquisition.]

Digital: A format that can be recognized and processed by a computer. Traditionally, many of procurement’s solutions were repositories, or databases, of files where only the most essential metadata was entered directly into the system. Digitizing the content (e.g., contracts) from the files in those repositories allows it to be efficiently searched, distributed, accessed and reused.

Solution: Technology that addresses one specific area of procurement responsibility (e.g., eSourcing, contract management, spend analysis). Solutions are often implemented as a suite and used around/on top of a platform.

Point solution: Technology that addresses one specific area of procurement responsibility independent of other concurrent solutions. Because each point solution is the exclusive focus of the company or group that develops it, it is likely to have unique capabilities but much harder to integrate than non-point alternatives.

Suite: A group or series of solutions/point solutions brought together to manage a more extensive workflow than any one solution could address in isolation. Depending on the circumstances, a suite may or may not be based on/built around a platform.

Legacy system/solution/suite: For this we will provide two definitions. 1. (nice definition) Technology that is old but is still being used because of the initial investment made to acquire and implement it or the failure of newer technology to render it obsolete. 2. (honest definition) Technology that is old but is still being used because no one is able to fully understand how it works well enough to recognize its shortcomings and replace it with a newer, better alternative.

In Summary

Now that we’ve clarified each of these terms in isolation, our next post in this series will get into more detail about how their meaning expands by combining them into phrases.

It’s important to keep in mind that a simple collection of point solutions doesn’t make a suite, and a cobbled-together suite of solutions does not make a platform.

Look beyond the terms and focus on the functionality: How quickly will you outgrow that point solution? Is that “suite” really just one great solution with mediocre solutions attached? Do you have to pay for all, regardless of whether you need/use them? How truly integrated is the data behind the solutions? Is there enterprise scalability for long-term growth?

Let’s face it, planned obsolescence should not be part of your business plan.